FAIR VALUE MEASUREMENT

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

2. FAIR VALUE MEASUREMENT

The Company uses a fair value approach to value certain assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The hierarchy consists of three levels:

· Level 1 – Quoted market prices in active markets for identical assets or liabilities;

· Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and

· Level 3 – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2 or 3 of the fair value hierarchy during the quarter ended March 31, 2016.  The following table presents the assets and liabilities recorded that are reported at fair value on our consolidated balance sheets on a recurring basis.

Assets and Liabilities Measured at Fair Value on a Recurring Basis  

(In thousands)
March 31, 2016	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents (1)	$	118,792	$	—	$	—	$	118,792
Total	$	118,792	$	—	$	—	$	118,792
Liabilities
Contingent consideration liability	$	—	$	—	$	152,070	$	152,070
Total	$	—	$	—	$	152,070	$	152,070
December 31, 2015	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents (1)	$	147,007	$	—	$	—	$	147,007
Total	$	147,007	$	—	$	—	$	147,007
Liabilities
Contingent consideration liability	$	—	$	—	$	166,800	$	166,800
Total	$	—	$	—	$	166,800	$	166,800

(1) Cash equivalents represent the fair value of the Company’s investments in money market funds at March 31, 2016 and December 31, 2015.

The following tables present a reconciliation of the Company’s recurring fair value measurements categorized within Level 3 of the fair value hierarchy. See Note 10 for additional information regarding the fair value of the contingent consideration liability.

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis – Common Stock Warrants

	Three Months Ended March 31,
(In thousands)	2016		2015
Beginning fair value		—	$	711
Change in fair value recognized in earnings		—		55
Exercises	$	—	$	—
Ending Fair Value	$	—	$	766

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis – Contingent Consideration Liability

(In thousands)
Balance as of December 31, 2015	$	166,800
Fair value adjustment		(14,730	)
Balance as of March 31, 2016	$	152,070

Effect of Raptor’s Stock Price and Volatility Assumptions on the Calculation of Fair Value of Warrant Liabilities

As discussed above, the Company uses the Black-Scholes option pricing model as its method of valuation for warrants that are subject to warrant liability accounting. The determination of fair value as of the reporting date is affected by Raptor’s stock price as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the security and risk-free interest rate. The primary factors affecting the fair value of the warrant liability are the Company’s stock price and volatility.